Introduction
This is largely based off the US Federal Trade Commission's January 2023 proposal to ban employers from imposing noncompete clauses on their workers, which it claims is "a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses". The FTC reckons this could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.
https://www.ftc.gov/news-events/news/pr ... ompetition
Exceptions
- The exceptions on non-compete clauses is when employee shareholders sell out (this occurs frequently in family businesses and sales of franchisees). Both the FTC and existing common law jurisdictions allow non-competes if the sale is in a commercially reasonable transaction.
- To give a (grossly simplified) example: if Chefs A, B, C sell a popular restaurant to Person D for "valuable consideration" (say US$5 million) and split the proceeds 40:40:20, so Chef A receive US$2 million, Chef B receives US$2 million and Chef C receives US$1 million, it is not an unenforceable contract for Person D to require that Chefs A, B and C do not run another restaurant nearby, say "no new restaurant by A, B, C within one hundred miles for one year" - Person D may not acquire the restaurant in the first place, or may acquire it for a lower price if Chefs A, B and C can compete against Person D immediately as clients switch over.
- There is now an exception (as per Sep) for "unjust enrichment" largely related to employees paid in advance (or receiving a premium for their work) for non-competes.
- There are no publicity requirements (unlike the proposed FTC rules) because of GAR#442 (Circulation of World Assembly Law).
Submitted draft
The World Assembly (WA),
Noting extant resolutions to protect the rights of workers;
Dismayed by clauses in employment contracts that impede workers from joining another employer or starting a business that competes with their previous employer;
Concerned by the impact of such clauses on (i) improving the remuneration of employees, (ii) impeding employers from hiring qualified workers, and (iii) hindering the pursuit of entrepreneurship, among other issues;
- Hereby defines:
- Contract to mean an employment contract between an employer and an employee, whether written or otherwise;
- Employee(s) to mean all formal and informal employees including temporary workers, interns, and apprentices, whether paid or unpaid;
- Employer to mean anyone (or any entity) who enters into a contract to employ the employee;
- IAO to mean the WA Independent Adjudicative Office;
- Hereby defines a non-compete clause to mean any terms in a contract that:
- hinders an employee from seeking or accepting roles with another employer; and/or
- impedes a departing employee's ability to operate a business that competes with their previous employer; such as (merely as examples of the aforesaid acts of hinderance or impediment):
- a very broadly defined non-disclosure clause for employees without access to sensitive commercial data or genuine trade secrets and merely serving to prevent them from using their skills and non-proprietary knowledge to improve their employment prospects;
- a training contract requiring reimbursement of expenses exceeding the actual training costs incurred by the employer;
- a contract that requires liquidating damages to be paid merely for the act of leaving an employer;
- Hereby requires, as soon as reasonably practicable upon the passing of this resolution, that a non-compete clause as defined in clause 2 shall be deemed to have been severed from a contract and declared null and void;
- Hereby prohibits an employer from restricting an employee from resigning and taking employment elsewhere or starting a business, nor subsequently claim for loss of business from the said employee, if either:
- the employee has given due notice to the employer of the intent to leave the employer according to the terms of the contract; or
- a valuable monetary payment, as determined by the laws of the relevant WA state, has been made by the employee to the employer to compensate for an early departure by the employee;
- Hereby permits:
- A contract with its terms severed or amended due to this resolution to be subject to a claim of unjust enrichment by any party to such a contract, with such claims limited to no more than the amount of any payments already made by an employer for the purpose of enticing the employee to consent to the terms of the contract severed or amended;
- A non-compete clause imposed by the national (or sub-national) government(s) of a WA state on the grounds of national security, if the employee is aware of, and voluntarily accepts, such requirements before starting employment;
- Hereby clarifies that this resolution does not apply to current or previous employee(s) with a financial interest in the employer itself, if such employee(s) voluntarily agree to non-compete restraints in return for selling their interest(s) in the said employer for valuable consideration;
- Hereby clarifies that, in case of disputes:
- The burden of proof shall be on the employer to any claims made by the employer against an employee at a level no less than a “preponderance of evidence” basis;
- In case of disputes, jurisdiction shall be asserted in the following order:
- The WA state stated in the contract as having jurisdiction, if specified;
- The WA state where the employer is resident or duly established;
- The WA state where the employee primarily work(ed);
- In case of conflicts on or between jurisdictions, the IAO shall adjudicate as a matter of law and not as fact.
Co-authors: Imperium Anglorum, Separatist Peoples, Cretox State
